Correlation Between Visa and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Visa and NMI Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Visa and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and NMI Holdings, you can compare the effects of market volatilities on Visa and NMI Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Visa with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and NMI Holdings.
Diversification Opportunities for Visa and NMI Holdings
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and NMI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Visa is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Visa Class A are associated (or correlated) with NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of Visa i.e., Visa and NMI Holdings go up and down completely randomly.
Pair Corralation between Visa and NMI Holdings
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.8 times more return on investment than NMI Holdings. However, Visa Class A is 1.25 times less risky than NMI Holdings. It trades about 0.16 of its potential returns per unit of risk. NMI Holdings is currently generating about -0.01 per unit of risk. If you would invest 27,801 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 3,669 from holding Visa Class A or generate 13.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. NMI Holdings
Performance |
| Timeline |
| Visa Class A |
| NMI Holdings |
Visa and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and NMI Holdings
The main advantage of trading using opposite Visa and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, NMI Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NMI Holdings will offset losses from the drop in NMI Holdings' long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| NMI Holdings vs. MGIC Investment Corp | NMI Holdings vs. Employers Holdings | NMI Holdings vs. James River Group | NMI Holdings vs. ICC Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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